Another jobs-killer that needs repeal
I’ve said it before, but it bears repeating. Rather than tinkering with the tax code and calling it a “jobs bill,” Congress and the Obama administration might try scouring the U.S. Code in search of job-killing laws to repeal. And as I am hardly the first to notice, one of the worst job-killers in federal law is the Davis-Bacon Act. Adopted in the 1930s to "stabilize" the construction industry (in part by protecting white workers in the North against competition from migrating Southern blacks), Davis-Bacon requires employers to pay the "prevailing" local wage as calculated by the Labor Department on federally-funded projects. By artificially raising labor costs on public projects, Davis-Bacon both reduces employment and soaks taxpayers. The main beneficiaries are the construction unions whose jobs it protects.
Yet Davis-Bacon not only remains on the books; at organized labor's behest, and with the support of President Obama, Congress further entrenched and even expanded it in the $862 billion stimulus bill. The law says that "all laborers and mechanics employed by contractors and subcontractors on projects funded directly by or assisted in whole or in part" must get the "prevailing" wage as per Davis-Bacon and related laws. That ensured coverage for some $49 billion in transportation construction that would probably have faced "prevailing wage" strictures anyway -- but also for $5 billion worth of Energy Department home weatherization projects, an area that was previously outside Davis-Bacon's scope.
The inevitable result has been less job creation at a slower pace than would have otherwise occurred. Obama said last year that the home weatherization program would "right away put people back to work." Actually, it took months to write new prevailing wage rules for more than 3,000 U.S. counties, during which time hardly any work took place. As of Dec. 31, 2009, only 9,100 homes had been weatherized out of 593,000 planned through 2012, according to a recent report by the Government Accountability Office. The GAO also reports Davis-Bacon-related delays in a separate federal grant program to remove lead hazards from certain homes.
Even if there had been no delay, Davis-Bacon would not have served the public interest. The law does not protect wages against an artificial drop due to a flood of federal construction money -- it forces an artificial increase. Davis-Bacon sets wages based on calculations by the Labor Department’s Wage and Hours Division, rather than statistics from the Bureau of Labor Statistics. The Wage and Hours Division’s formula, heavily influenced by union lobbying, "calculates, not the prevailing wage, but the wage that would prevail if the wage-setting process were dictated by the construction unions," according to a study by the Beacon Hill Institute at Suffolk University. The result is "prevailing" wages that are 22 percent higher, on average, than those documented by the impartial Bureau of Labor Statistics.
The Obama administration says that the weatherization delays are over, and that, since Jan. 1, weatherization has been proceeding at its intended pace of 20,000 homes per month. That's good to know, but the fact remains that the weatherization program, and indeed the stimulus plan as a whole, won't create as many jobs as it would have without Davis-Bacon. Not to mention the fact that winter is almost over, so the promised energy conservation impact will take that much longer to materialize.
In its defense, the administration says the goal of the stimulus bill was not just to create jobs, but relatively well-paying jobs, so as to boost family incomes. No doubt the lucky ones who actually get a piece of the federal pie will find this argument convincing. But what is the president going to tell all the willing workers who end up with zero jobs and zero income? Or the taxpayers who are getting less-than-optimal job-creation "bang" for their stimulus bucks? In boom times, Davis-Bacon's protectionism is merely pernicious. In an economic emergency of this magnitude, it's outrageous.
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